Inmarsat's maritime business drifts as sets solo course

By Paul Sandle

LONDON (Reuters) - Inmarsat talked up its prospects as a standalone company after it rebuffed an approach from EchoStar last month but its shares slipped after a lacklustre performance from its maritime business.

The British satellite operator was able to reiterate guidance as it reported a 5 percent rise in quarterly revenue, driven by demand from airlines and governments.

Its shares were down 6 percent after the results at 545.2 pence at 1315 GMT, although they remain well above the levels they were trading at before it rejected EchoStar's first approach in June.

Analysts at Jefferies, who have a "buy" rating on the stock, said the results should support the recent re-rating, and they didn't expect consensus forecasts to change.

"On the two touch points for sentiment; maritime remains two steps behind where consensus would like it to be and will remain a focus area; aviation is tracking well," they said, referring to two of the main divisions.

U.S. company EchoStar dropped its pursuit in July after its 532 pence a share bid, valuing the group at $3.2 billion, failed to persuade Inmarsat's board to enter into talks.

"They had plenty of opportunity to make a serious offer and they decided not to," Chief Executive Rupert Pearce said, adding that EchoStar did not come close to the level that would trigger Inmarsat to engage.

Pearce said the company would consider any offer that it felt reflected the true value of the business.

"If somebody wants to pay up to buy this company at fair value, it's our job to facilitate that," he said.

"There's no issue about being against a bidder per se. It's a moment of truth on value for our shareholders and we are guardians of that at the time."

But he said the company was focused on its own strategy.

"We are not for sale, we were not for sale, we are not a company that is concerned about its prospects as a standalone company," he said.

SLOW TURNAROUND

Pearce said maritime, the biggest contributor to revenue, and the enterprise division were "not quite so sparkling" in the quarter as they were in the first.

"The turnaround in maritime is happening, but like many things in that industry it's quite slow," he said in an interview.

Maritime was "a bit anaemic" in the quarter - revenue rose 0.1 percent - but the fundamentals were positive, he said.

"I am not disheartened at all by the maritime performance."

Founded in 1979, London-based Inmarsat was set up by the International Maritime Organization as a way for ships to stay in communication with shore and make emergency calls.

Since then, the group has become a public company, providing communications for the British armed forces, aircraft, ships, broadcasters, aid agencies and governments through its fleet of 13 satellites.

Pearce said he recognised investors' concerns about the development of the nascent market for wifi on commercial flights, potentially lucrative but also bringing additional costs with it.

"We are being very disciplined in the way we roll the business out," he said.

"We are showing the pathway but the proof points will come over the next two or three years as things start to settle down. (But) we really do believe this could be a very substantial contributor to free cash flow generation over the coming years."

The company said it had more than 1,400 aircraft under contract, and Qatar Airways and Air New Zealand launched services in the quarter.

Inmarsat reported revenue of $371.8 million for the three months to end June. Core earnings edged up 0.8 percent to $198.1 million.

(Reporting by Paul Sandle; Editing by Alistair Smout/Keith Weir)